Is it true that merchant bankers are making record fees in 2021 from IPOs?

That is absolutely true. In fact, in the year 2021 alone, in the first 8 months of the year, merchant bankers have earned more than Rs.1,013 crore which already higher than the money that investment banks earned in a full year in any year in the past. There have already been IPOs worth Rs.62,600 crore with many more mega IPOs slated this year likely to take the total count to beyond Rs.100,000 crore. In 2017, issue fees were at Rs.866 crore.

However, the point is that Indian investment bankers have collected less than 1% of the global pool of $13.7 billion in investment banking fees. The highest fees for merchant banks worth Rs.229 crore was fetched by the Rs.9,375 crore Zomato IPO. Some of the big IPOs slated for this year include Paytm, Nykaa, Ixigo, MobiKwik and Policybazaar. That could substantially expand the investment banking fees pool this year.

However, investment bankers also subsidize many of the PSU IPOs. In the case of the LIC IPO, most of the merchant bankers quoted the minimum fee of Rs.1 crore just to get the prestigious mandate. This year, the average fee has stood at 1.6% of the total issue value, lower than the median of 2-3%. However, this does not include the distribution commission that the distribution wings affiliated with these investment bankers earn.